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CONSTRAINTS ONPRIVATECONSERVATION

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Constraints on private conservation: somechallenges in managing Australia’s

tropical rainforests

Conference paper presented to the Annual Conference of the RainforestCooperative Research Centre, Cairns, 14–15 November 2001.

Private sector conservation in Australia has attracted increasing attention in recentyears. Not only has Landcare attracted broad based natural support, but innovativenew organisations such as Earth Sanctuaries and the Australian Bush Heritage Fund(ABHF) have received considerable public media attention (see PC 2001a).Parliamentary inquiries have considered the potential for private sectorconservation, for example: the Commonwealth inquiry into the commercialutilisation of wildlife (Rural and Regional Affairs and Transport References 1998);the Commonwealth inquiry into public good conservation (Standing Committee onEnvironment and Heritage 2001) and regional inquiries such as the inquiry into theutilisation of Victorian native flora and fauna (Environment and Natural ResourcesCommittee 2000). Additionally, academic literature on private sector conservationhas expanded (see, for example, Bennett 1995a and Binning and Young 1997,1999a and 1999b for an introduction).

The Productivity Commission has recently conducted a suite of research projectsexamining the role of the public and private sectors in conserving biodiversity(Aretino et al. 2001; Bates 2001; Productivity Commission 2001a, 2001b). Throughthis research, it became apparent that both the public and private sectors have animportant role to play in conserving biodiversity in situ (that is, diverse native floraand fauna in their natural habitat). While not overlooking the important role thepublic sector must play, an efficient and effective framework for conservationshould recognise that the private sector can contribute to public conservation andalso alleviate some of the demands upon of the public sector. However,conservation by the private sector appears to be constrained by some elements ofland tenure, native wildlife legislation, the competitive neutrality framework andtaxation arrangements (PC 2001a). Some aspects of these arrangements areespecially relevant to the conservation of tropical rainforests in Australia. Theobjective of this paper is to consider these constraints.

2 CONSTRAINTS ONPRIVATECONSERVATION

1. Australia’s wet tropics and private sectorconservation: some facts

The wet tropics bioregion of Australia covers an overall area of 1 850 000 hectaresacross Queensland and the Northern Territory. Almost 900 000 hectares of thiscomprises the Wet Tropics World Heritage Area, of which more than half consistsof national parks and timber reserves. The majority of the tropical rainforestslocated in the wet tropics region are located in a narrow coastal strip that extendsnorth from Townsville in areas that experience rainfall over 2000 millimetres perannum (Department of Natural Resources 1999).

Interest in conserving the wet tropics rainforests partly reflects an increasedunderstanding about the importance of tropical rainforests for climate, soil stability,biodiversity and its potential source of commercial products, such aspharmaceuticals. Owing to the time and difficulties involved in re-establishingtropical rainforests, a key approach to conserving tropical rainforests must be in situconservation.

Property rights and in situ conservation by the private sector

In Australia, in situ biodiversity conservation has traditionally been viewed as theprovince of governments. Nationally, around 7 per cent of the Australian landmassis designated as a public nature conservation reserve (AUSLIG 2001).

Involvement by governments in conducting in situ biodiversity conservation hasconventionally been viewed as a response to insufficient private conservation —arising because some aspects of biodiversity display ‘public good’ characteristicsthat can deter individuals from conserving them. For example, biodiversity confersbenefits on the community by contributing to environmental stability, therebycontributing to the existence, option and bequest values of habitats and species.These benefits are ‘non-rival’1 and ‘non-excludable’2 in nature, making it difficultfor individuals to successfully recoup the costs of their supply (see Tietenberg1992). The existence of such public good characteristics has commonly beenidentified as a key cause of excessive deforestation and environmental degradation.

While it is unlikely that the private sector could meet all the biodiversityconservation needs of Australia, it nevertheless contributes substantially to it.Biodiversity conservation currently undertaken by the private sector partly reflectsaltruistic or philanthropic desires to protect the environment and secure it for future

1 Enjoyment of benefits by one individual does not reduce the benefits available to others.2 Once available to one individual, the benefits are available to others to enjoy.


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generations. But, while some aspects of biodiversity display public goodcharacteristics, others do not and, for these aspects, the private sector may haveincentives to conserve biodiversity. For example, where individuals or companiesare able to control access to a region — as might be the case with a privatesanctuary — it may be possible for firms to successfully recoup conservation costsby charging tourists to visit the area and view the native flora and fauna. (See PC2001a for examples.)

Examples of philanthropic and commercial in situ conservation by the private sectorinclude:

• investment in activities to conserve native wildlife and habitat or to help solveenvironmental problems;

• donating land for placement under a conservation covenant or agreement toensure it is not developed in the future (this may involve public assistance); and

• sponsoring conservation programs or other campaigns to conserve nativewildlife.

Increasing importance of private sector conservation

The involvement of the private sector in supplying in situ biodiversity conservationis becoming increasingly important in Australia for two main reasons — concernsabout the potential of public sector reserves to effectively protect biodiversity; andrecognition of the significant influence private sector managers have on land usedecisions.

Concerns about public sector reserves

Concerns about the ability of public sector reserves to adequately protectbiodiversity stem from observations that public reserves may:

• be poorly selected and thereby poorly represent biodiversity;

• be too small on their own to maintain viable populations of individual speciesand ecological processes necessary to sustain natural communities in the longterm;

• face high costs;

• suffer off-reserve degradation encroachment (Bennett 1995a; Bennett 1995b;Binning and Young 1999a; Coveney 1991; Farrier 1995; McNeely 1994;Pressey 1995; State of the Environment Advisory Council 1996; Sherwin 1997).


This latter concern about the potential for off-reserve degradation encroachment islikely to be especially relevant to the wet tropics given the extent of private landownership and control in the region (see section on land tenure issues below).

Private land management

Private land in Australia is broadly categorised as Crown leasehold or freehold land(see AUSLIG for information). The property rights to Crown leasehold land,predominantly made up of perpetual and term pastoral leases (AUSLIG 2001), areshared by the lessee and the Crown, and perhaps by traditional owners. The Crownretains a range of powers over Crown leases, including powerful resumptionprovisions (see below). Where native title is applicable, activities on the leased landneed to be consistent with the Native Title Act 1993 and the Native Title AmendmentAct 1998.

Property rights to private freehold land confer relatively exclusive rights to theholder of the deed or title to the land. The Crown retains only limited resumptionrights to the land (mainly for minerals resources) and there are fewer and lesspervasive provisions with respect to native title (refer to Native Title Act 1993 andNative Title Amendment Act 1998).

Currently, around two thirds of all Australian land (about 500 million hectares) isunder the control of private landholders and resource managers in the form of eitherfreehold or leasehold land (AUSLIG 2001) (table 1). Of all privately controlledland, freehold land makes up about one-third nationally and private Crownleaseholds the rest. In Queensland, the importance of private sector control overland is especially significant. Queensland has the highest proportion of land inAustralia under private control, with 91 per cent of the State consisting of eitherprivate freehold or leasehold (Crown) land (AUSLIG 2001).

2. Land tenure issues

Two land tenure issues are relevant in facilitating private conservation in andaround the wet tropics region:

• problems and challenges in undertaking private conservation on pastoral leases;and

• administrative and institutional arrangements for encouraging, facilitating andmanaging conservation agreements on private land.


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Conservation on pastoral leasehold land

Several private groups pursuing conservation activities on pastoral leases haveemerged in recent years. These include non-profit groups such as:

• Birds Australia, a private conservation group aimed at conserving Australia’snative birds;

• the Australian Bush Heritage Fund (ABHF), a private conservation group aimedat protecting highly threatened and/or significant flora and fauna; and

• the Australian Wildlife Conservancy (AWC), a private conservation group thatis seeking to enhance and protect biodiversity.

Table 1 Private land in Australia, by category and jurisdictionthousand square kilometres

Jurisdiction Private Crownleaseholda

Freehold Total privateland

Totalprivate/total

land %

Queensland 939.8 627.2 1 567.0 91New South Wales 308.9 405.5 714.4 89Victoria 0.1 155.2 155.3 68South Australia 418.4 158.4 576.8 59Northern Territory 666.6 6.4 673.0 50Western Australia 899.9 205.1 1 105.0 44Tasmania - 27.2 27.2 40Australian Capital Territoryb 0.9 - 0.9 38

Australia/total 3 234.6 1 585.0 4 819.6 63

a Does not include Aboriginal freehold and leasehold land held by designated Aboriginal communities, withspecial conditions attached to the titles. b All freehold land in the Australian Capital Territory has beenresumed and vested in the Crown, preventing its sale or disposal as freehold land.

Source: AUSLIG (2001).

They also include businesses who conduct commercial conservation such as EarthSanctuaries Ltd (PC 2001a) or those which conduct businesses dependent onconserved areas, such as commercial wildlife tours (see below).

These private conservation groups face a number of constraints in pursuingconservation activities on pastoral leasehold land. A central factor appears to be thatpastoral leases are controlled and administered by a land tenure system designed tofacilitate pastoralism with limited scope to alter the primary purpose of a lease toother activities such as conservation. Another factor is uncertainty surroundingproperty rights held by the Crown through resumption provisions, and by traditionalowners through native title.


While there are only few pastoral leases within the wet tropics region, the areacontains many private holdings that affect biodiversity levels. For example, the WetTropics Management Authority (1999) claims that the Wet Tropics Heritage Areaalone contains more than 300 freehold and leasehold titles and that the Area holdsmore than 2500 immediate neighbouring landholders. All of these properties can beimportant to the future of the tropical rainforests and the diverse set of valuesassociated with them. For example, they may contain pockets of rainforest withrelated resources such as groundwater and forest ecosystems being shared acrossproperty boundaries.

Adding/varying uses on pastoral leases to reflect conservation

Each State and Territory has legislation setting out the provisions and conditionsgoverning pastoral leases (Binning and Young 1997). In all jurisdictions, the termsof a pastoral lease generally preclude activities on the leasehold land other thanpastoralism and activities associated with pastoralism.

Currently, there is no form of lease tenure that recognises conservation as a primaryland use in the way that a pastoral lease recognises pastoralism. However, eachState and Territory has the legislative ability to grant exemptions to the pastorallease provisions or to add additional purposes to existing leases. In Queensland,applications made by lessees outlining the proposed change in land use are assessedby the Lands Minister who has the discretion to grant approval.

Destocking a pastoral lease

An important constraint to private conservation on pastoral leases appears to be thelimited opportunities that are available to alter stocking provisions. All pastoralleases have some level of grazing or stocking provision attached to their title whichrequires the lessee to use the land for pastoral purposes unless an exemption isgranted.

In central Queensland, the ABHF is seeking greater control over the level of stockthat it is required to graze on the recently purchased Carnarvon Station pastorallease (ABHF 2001). The lease currently requires the property to be grazed‘sustainably’ (ABHF, pers. comm., 14 May 2001). Within the constraints of thisrequirement, the ABHF is establishing grazing trials to help determine the futuremanagement objectives for the property.


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Resumption provisions

Under lease provisions in each State and Territory, certain property rightsassociated with pastoral leasehold land remain the property of the Crown. Thistypically includes ownership of timber and soil and the authority to resume the landfor specified activities. In Queensland, under the Land Act 1994, most leasescontain a provision that all or part of a lease may be resumed with 6 months notice.

The existence of such resumption provisions enables governments to accommodatefuture uses of land that are more valuable to society than current ones. Suchprovisions are infrequently exercised. Nevertheless, while other more valuable usesof land are not apparent, resumption provisions can create uncertainty whereindividuals or groups are making decisions to invest in pursuing conservationobjectives. For example, in Queensland, the ABHF took into account the likelihoodof resumption of a leasehold property (Carnarvon Station) before a decision topurchase the lessee rights was made (ABHF, pers. comm., 15 February 2001).

Native title

The Commonwealth Native Title Acts (Native Title Act 1993 and Native TitleAmendment Act 1998) are arguably the most significant development in themanagement of pastoral leases since the inception of this form of tenure in the mid-1800’s. Where lessees wish to diversify their activities on a pastoral lease byaltering lease purposes by, for example, adding purposes such as conservation andtourism, these must be consistent with the rights of holders of native title (refer toNative Title Amendment Act 1998).

Uncertainty about the effect of native title was noted by the QueenslandGovernment’s Submission to the Industry Commission inquiry into ecologicallysustainable land management:

Diversification into alternative activities on pastoral and grazing leases could involvenative title considerations which would affect such activities (QueenslandGovernment 1997, p. 16).

Any uncertainty about the effect of land use provisions could delay efforts byindividuals to participate in private conservation of land.

Voluntary conservation agreements and land tenure

One mechanism to facilitate the conservation of biodiversity on private land is theuse of conservation agreements (covenants, easements and other agreements) that


enable values associated with the conservation of biodiversity to be formallyrecognised and bound to land tenure.

There is a growing demand in Australia for such agreements from individuallandholders and conservation groups such as Birds Australia and the ABHF (seePC 2001a). This growing demand highlights the need for efficient and effectiveadministrative and institutional arrangements.

Conservation agreements for the protection of biodiversity

Three issues that may be important for private conservation efforts in the wettropics are the role of conservation trusts to facilitate and manage conservationagreements, the establishment of agreements on pastoral leases and the effect ofCrown resumption provisions on the uptake of agreements.

In broad terms, a conservation agreement is a legally binding contract or agreementbetween a landholder and a third party such as a government or conservation trust,regarding the use and management of a piece of land for a fixed term or inperpetuity (Binning and Young 1997). Agreements usually take the form of aconservation covenant or easement. Covenants place restrictions on the landholder’suse of the land while easements confer the right to do something on anotherperson’s land or restrict the way in which the landholder can use the land (IndustryCommission 1998). Conservation agreements have been extensively used in severalcountries other than Australia such as New Zealand, the United Kingdom and theUnited States (PC 2001a).

In Australia, each State and Territory has legislation that allows for conservationagreements to be established on private land. Queensland National Parks andWildlife offer formal conservation agreements through their Nature RefugesProgram whereby landholders can negotiate a binding agreement over their land forconservation purposes. As of March 2001, 55 such agreements had been negotiatedcovering about 16000 hectares (Queensland Parks and Wildlife Service, pers.comm., 14 March 2001). Queensland also operates a Land for Wildlife schemewhich allows landholders to register their properties if areas within the property areactively managed for nature conservation. These ‘agreements’ are non-binding(Binning and Young 1997).

The potential role of a Queensland conservation trust

Notwithstanding the benefits of the Nature Refuges Program and Land for WildlifeScheme operated in Queensland, there may be merit in establishing a statutoryconservation trust similar to the Victorian Trust for Nature (refer to Trust for Nature


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2000a) to encourage, facilitate and manage conservation agreements in Queensland.In particular, the use of non-profit conservation trusts to oversee conservation onprivate land can be helpful in harnessing private funds for conservation, as well asin potentially avoiding some of the distrust that landholders may associate withgovernment conservation agencies (Industry Commission 1998). Accordingly, theBeattie Government, as part of its recent election platform, promised that such astatutory conservation trust body would soon be established in Queensland tofacilitate private conservation (Beattie 2001).

Conservation agreements on pastoral leases

Historically, conservation agreements have focused on private freehold land.However, there is an emerging interest among holders of pastoral leases to establishsuch agreements. For example, Birds Australia and the ABHF have negotiated orare currently negotiating agreements in South Australia, Queensland and theNorthern Territory (PC 2001a).

While there may be legislation that enables covenants and other agreements to beestablished on pastoral leases, as for freehold, negotiating agreements for pastoralleases is complicated by the fact that property rights to the land are split between theCrown, lessees and traditional owners (where native title is applicable).

Even before a conservation oriented lessee can contemplate establishing anagreement for a property, the prevailing lease conditions must first be amended torecognise the conservation objectives for the land. Any changes to the leaseconditions and pattern of land use may also need to be consistent with native title(PC 2001a). Furthermore, while it may be possible to alter the lease conditions andhave these recognised as part of a conservation agreement, the Crown still retainssignificant resumption rights for pastoral leases (PC 2001a). These may act todiscourage lessees from committing to the process of negotiating an agreement (seebelow).

With conservation agreements on private freehold land, non-profit trusts may bewell placed to facilitate conservation agreements on leasehold land and encourageinterested lessees to undertake actions to promote conservation. They may also beable to better arbitrate and ‘bridge the gap’ between the Crown, lessees andtraditional owners.

The effect of resumption rights

The Crown retains resumption provisions for private land that cannot be removedby binding private land tenure to a conservation agreement (for example, see


Queensland Land Act 1994). Such provisions enable governments to accommodatefuture uses of land if they are more valuable to society than current ones. However,they may act to discourage landholders from entering into an agreement on thepremise that the threat of resumption counters the purpose of the agreement andthereby reduces the value of the land as a conservation property. The Trust forNature (2000b) in a submission to a Victorian Government Review of ProposedAmendments to the Minerals Resources Development Act 1990 said:

The fact that Trust for Nature covenanted land is not exempted from exploration in theMinerals Resources Development Act, as is the case for land that is a reference areaunder the Reference Areas Act 1978; land that is a National Park, Wilderness Park orState Park under the National Parks Acts … is of the greatest concern to the Trust, itscovenantors and potential covenantors. We have on file record of a covenant not signedon important habitat because of the land owners perception of the devaluation of thecovenant due to the lack of this exemption in the act … (Trust for Nature 2000b, p. 3).

The Trust for Nature recommended that conservation covenants should beexempted from mineral exploration in Victoria and that such reforms:

… would provide much needed surety in nature conservation on private land thatrecognises the contribution that conservation of private land makes to the whole of thecommunity … (Trust for Nature 2000b, p. 3).

However, if the value of alternative uses of land exceeded the value of lostconservation, the option of resumption may still be in the interest of the community.The benefits from exempting conservation land from resumption would need to beconsidered in light of this.

3. Queensland native wildlife legislation

Commonwealth and State/Territory regulatory frameworks for native wildlife canaffect the extent of conservation undertaken by the private sector. Queenslandnative wildlife legislation controls the taking, keeping, use and trade of nativewildlife by the private sector. In 2001, the Queensland Government commenced areview of Queensland native wildlife legislation which is due to report in late 2001(McKinnen, A., Queensland Parks and Wildlife Service, Brisbane, pers. comm.,29 August 2001). Existing Queensland native wildlife legislation would appear toconstrain some private sector conservation and may impede the achievement of thepurpose of the legislation — conservation of nature.

Ownership issues

While holders of native wildlife have some rights over their animals in Queensland(for example, variously to hold, trade, display or breed the animals), they do not


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have complete ownership of native wildlife as any use outside the conditions of alicence or permit would require a further application for another licence or permit(PC 2001a).

For example, Queensland, on behalf of the Crown, appears to assume rights andresponsibilities associated with ownership of captive native wildlife lawfullyimported into Queensland, and ownership of any resulting captive-bred nativewildlife. It also appears that the rights and responsibilities associated withownership of captive native wildlife would pass to another state or territory if thatwildlife was exported from Queensland to another region where differentadministrative arrangements applied (PC 2001b).

The legal status and the conditions attached to native wildlife ownership could deterinvestors in conservation — for example, from seeking to breed native animals torepopulate regions — because of uncertainty about ownership. The option ofassigning wild native animals to the Crown, and captive-bred native animals to theperson responsible for keeping them, could be explored as a way of reducinguncertainty (PC 2001a).

Licensing system

The Queensland native wildlife legislation appears to be more complex thannecessary and this may create difficulties for private sector agents who seek toconserve native wildlife (PC 2001a).

Queensland currently operates eleven different types of licence (that is, commercialwildlife, recreational wildlife, recreational wildlife (specialist), internationalwildlife, commercial wildlife harvesting, recreational wildlife harvesting, wildlifedemonstrator, wildlife exhibitor, wildlife farming, museum and herbarium) for eightdifferent schedules of native wildlife. It also operates eight types of permit (damagemitigation, educational purposes, keeping of protected or prohibited wildlife, rescueof wildlife, scientific purposes, wildlife movement, commercial whale watching andclearing) (PC 2001b).

Despite the large number of specific licences and permits, private conservationinitiatives, especially for threatened native wildlife, do not easily ‘fit’ within thecurrent system of licences and permits, as there is no specific category of licence forthese activities. This is because of the design of the licensing system and thespecific purpose of the different licence and permit categories. If regulation isnecessary, the approach should be to specify the desired outcomes that are to beachieved, rather than prescribing the end use through discrete licence or permitcategories (PC 2001b).


An educational or scientific permit would appear to be the only way that privateconservation initiatives may receive approval to take and keep rare or threatenednative wildlife from the wild. However, there are restrictions on these permits thatmay prevent them from being granted to private conservation initiatives. Forexample, an applicant for a scientific permit might need to demonstrate that they areeither:

• associated with a recognised scientific organisation, or a professionalorganisation involved in scientific research or ‘a non-profit communityorganisation with a genuine interest in the conservation of wildlife; or

• are completing postgraduate training in scientific research or has achieved asatisfactory level of competence in scientific research (s113 of the NatureConservation Regulation 1994).

The permit system therefore only allows a narrow range of purposes with noallowance for activities outside this definition potentially constraining a range ofprivate conservation-related activities.

Inter-jurisdictional issues

Inconsistent native wildlife legislation across jurisdictions can affect conservation-related activities by the private sector. For instance, although the licensing systemsthat apply in each State are broadly similar, there are some significant differencesbetween them. Some jurisdictions, such as South Australia, have a more flexibleand non-restrictive system where applications can be made to keep any nativefauna. Other jurisdictions, such as Queensland and Western Australia, haverestrictions and controls that appear to be more complex than necessary and thatmay unduly constrain private conservation initiatives. For example, in the crocodileindustry, the Northern Territory and Western Australia allow farming of crocodileeggs whereas Queensland does not. Western Australia also provides for the transferof native wildlife permits from one person to another whereas Queensland does not.These differences may not allow businesses in the industry to compete on an equalfooting (PC 2001a).

The Senate Inquiry into the commercial utilisation of native wildlife was concernedthat ‘duplicated and onerous administrative procedures were unnecessarilyhindering legitimate industries in Australia’. The Inquiry recommended ‘that Stateand Federal Governments together review all administrative procedures relating tocommercial utilisation of native wildlife in Australia with a view to increasing theirefficiency’ (Rural and Regional Affairs and Transport References Committee1998).


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4. Competitive neutrality

One form of biodiversity conservation by the private sector is the establishment ofprivate reserves. Since most reserves to protect biodiversity have traditionally beenpublic, an important issue for firms wishing to establish private reserves is how welltheir reserves will be able to compete with their public counterparts.

Private reserves may be operated on a charitable basis — as is the case of privatereserves created by Birds Australia — or on a commercial basis — as with EarthSanctuaries (Aretino et al. 2001). An example of a commercially operated privatesanctuary in Australia’s tropical rainforests is Carrowong fauna sanctuary nearCairns (Carrowong 2001a; Halstead 1998). The region in which the sanctuary islocated contains rare vine trees, around 130 bird species and a variety of threatenedspecies such as the southern cassowary and northern platypus. As part of itsbusiness, Carrowong offers the public nocturnal walks to view the flora and faunaof the forest (Carrowong 2001a; 2001b).

A major influence on competition between public and private firms in Australia isthe National Competition Policy that aims to accelerate and broaden progress onmicroeconomic reform in recognition of the benefits it can bring. An importantaspect of the national competition policy is ‘competitive neutrality’.

Competitive neutrality is the principle that government businesses should not enjoyany net competitive advantage simply because they are publicly owned (seeCommonwealth Competitive Neutrality Complaints Office 1996 for information).In practice, it means that government jurisdictions are required to identifygovernment owned businesses that are potentially subject to competitive neutralityprinciples and nominate specific measures for these businesses to ensure that each iscompetitively neutral. The measures might include, for example, requiringgovernment businesses to recover the full costs of the goods and services theyprovide, or requiring businesses to undergo commercialisation (PC 2001a).

In reality, competitive neutrality is limited to certain government businesses.Competitive neutrality is not, for example, intended to apply to governmentbusinesses which conduct non-profit, non-business public sector activities, or wherethe costs exceed the benefits (Commonwealth Competitive Neutrality ComplaintsOffice 1996).

In addition, competitive neutrality can only apply to businesses that are consideredto be significant’. The meaning of ‘significant’ varies across jurisdictions. Forexample, in New South Wales, Western Australia and South Australia, governmentguidelines suggests that public enterprises earning commercial receipts of over$2 million per year could be significant, while guidelines for the Commonwealth


Government suggest that a business earning over $10 million per year could besignificant (although Government Business Enterprises, other share-limited tradingcompanies or business units, are always significant, regardless of turnover).

In Queensland, significance for competitive neutrality may initially be determinedon the basis of expenditure. Thus, a public business may be declared significant if ithas a current expenditure greater than $15 million per year (for non-water and non-sewerage enterprises) or $25 million per year (in the case of water and sewerageenterprises) (Queensland Government 1996).

Other determinants of significance may include:

• whether a government firm charges for goods and services;

• whether an independent manager runs the government business;

• the position of the government business in the local market; and/or

• the existence of an actual or potential competitor in the market (PC 2001a).

Ultimately, application of competitive neutrality is determined on a case-by-casebasis.

Difficulties in applying competitive neutrality to private sanctuaries

There are difficulties in applying competitive neutrality to public reserves in the wettropics. In Queensland, no conservation services such as public sanctuaries have todate been nominated as significant for competitive neutrality purposes (Godfrey. L.Queensland Competition Authority, Brisbane, pers. comm., 28 August 2001). Thiscould mean that public sanctuaries are able to enjoy competitive advantages overprivate sanctuaries. In other regions (notably South Australia), a complaint can belodged against a business not listed as significant and an assessment can be made ofits significance and whether competitive neutrality measures should be applied. InQueensland, the declared list of significant businesses cannot be altered bycomplaint as significant businesses are determined by the Minister responsible forthe Queensland Competition Authority Act 1997, the Premier and the Treasurer(Godfrey. L. Queensland Competition Authority, Brisbane, pers. comm., 29 August2001).

Although there is little to suggest that competitive neutrality provisions will beapplied to public reserves in Queensland in the near future, opportunities for changeexist. Nevertheless, even if public reserves in Queensland were opened tocompetitive neutrality, difficulties exist in applying it to reserves. For example,government businesses that are required to undergo commercialisation to achievecompetitive neutrality may be required to earn a positive rate of return. (This can


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provide incentive for managers to achieve full cost recovery and lead to moreefficient outcomes.) However, proof of achieving a positive rate of return relies onthe ability of managers to accurately value assets.

In practice, it can be difficult to accurately value wildlife and habitat assets becausethere are no observable markets for these assets. Also, it can be difficult to separatecommercial and non-commercial operations so that commercial operations can besubjected to competitive neutrality measures while non-commercial activities areexcluded. In particular, it can be difficult to distinguish government ‘communityservice obligations’ (excluded from competitive neutrality obligations) from otherbusiness strategies. Community service obligations are the non-profit activities thatgovernment business enterprises undertake. In public reserves, community serviceobligations may include the requirement for public sanctuaries to discountadmission price for particular community groups such as school children and seniorcitizens (PC 2001a). However, many private businesses also discount charges forsenior citizens and students to increase admissions. It can thus be difficult todetermine when price discrimination is related to commercial or communitypurposes (PC 2001a).

These issues are likely to be increasingly important to the protection of tropicalrainforests in a time when ecotourism in the wet tropics is increasing. An estimated4.8 million visits per year take place at different sites for tourism and recreation inAustralia’s wet tropics (Manidis Robert Consultants and Taylor EnvironmentalConsulting 1994). Around 50 companies are estimated to offer regular tours to sitesin the Wet Tropics World Heritage Area (Young et al. 1996).

To date, only one complaint against a public sanctuary — the Cleland Wildlife Park(CWP) in South Australia — has been upheld in Australia. In this case, the relevantCompetition Commissioner deemed the government business ‘significant’ andsuggested that full cost reflective pricing be applied to Cleland within a frameworkof commercialisation (box 1).

5. Tax provisionsExisting tax arrangements may potentially influence the type and amount of privateconservation activities undertaken. Tax arrangements are sometimes used toencourage particular conservation activities (see ‘environmental altruism’ below).However, some tax arrangements create distortions and disincentives thatdiscourage private conservation efforts (PC 2001a).

Potential distortions may occur when tax arrangements treat similar activities,organisations or individuals inconsistently. For example, the different treatments ofdonations to environmental organisations may affect the relative costs (and


therefore attractiveness) of alternative types of donations and may consequentlyinfluence the type and amount of environmental altruism undertaken (PC 2001a).

Inconsistencies exist in tax treatments of conservation-type expenditures (such asweed and pest control) between land managed for conservation and other uses. Taxarrangements also distinguish between similar activities undertaken for differentreasons, even though the community-wide benefits of the conservation activities donot depend on why the activity is undertaken (see below). The arrangements mayencourage tax payers to make choices over the use of their land to take advantage of(or avoid) unfavourable tax treatments (PC 2001a).

Box 1 Competitive neutrality and public sanctuaries — the case ofCleland Wildlife Park

Cleland Wildlife Park is a division of the South Australian Department of Environmentand Heritage, part of the National Parks and Wildlife Service. The Park offers walkingtrails through the bush, animal displays, refreshments and information for the public, aswell as participating in a range of species recovery programs and education programs.

Competitive neutrality complaints against Cleland were brought by Earth SanctuariesLtd in 1998. Earth Sanctuaries owns a private sanctuary, Warrawong, close to Clelandwhich holds displays of native animals, provides guided tours and providesrefreshments and accommodation. Earth Sanctuaries claimed that Cleland enjoyedunfair competitive advantages in competition because it operated under differentregulatory arrangements. For example, it argued that Cleland was allowed to havespecies that Warrawong was denied, such as koalas.

Upon investigation, the South Australian Competition Commissioner deemed Cleland a‘significant business’ for competitive neutrality purposes and identified clear similaritiesbetween the operations of Earth Sanctuaries and Cleland Wildlife Park. TheCommissioner decided that the application of competitive neutrality principles waslikely to generate net benefits to the community, mainly through improving competitionand contestability in the market. The Commissioner suggested that full cost reflectivepricing be applied to Cleland within a framework of commercialisation. The SouthAustralian Department for Environment and Heritage would then be obliged toestablish Cleland Wildlife Park as a separate business unit within the Department,necessitating the generation of separate financial statements. It would also be requiredto undertake its own analysis to confirm the appropriate competitive neutralityprinciples to apply. In response, the South Australian Department of Environment andHeritage has proposed undertaking full cost recovery. In the meanwhile, admissioncharges to Cleland have increased and some staff functions have been eliminated.

Source: Aretino et al. (2001); Cleland Wildlife Park (2001); Competition Commissioner of South Australia(1998); PC (2001a); South Australian Government (2001).

These problems may be magnified by other government measures (such asagricultural assistance) and/or tax treatments that actively encourage other land uses


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that may impact on biodiversity. Existing tax concessions that lower the relativeoperating costs of commercial activities may make those businesses relatively moreattractive and, consequently, draw more resources to them and, potentially, awayfrom biodiversity conservation.

Environmental altruism

Under existing tax provisions, monetary donations to environmental charities aretax deductible, as are donations of land valued over $5000. However, implicit‘donations’ such as conservation covenants are either not recognised or are untested(PC 2001a). The Prime Minister (Howard 2001) recently announced proposedchanges to existing arrangements that may address some of these concerns.

Other inconsistencies in tax provisions for conservation relate to the sale of land toenvironment and heritage organisations at a discounted price (a so-called ‘bargainsale’). The Ian Potter Foundation suggests that, together, deductions for the‘donation’ component of bargain sales (the difference between the full market valueof the land and the concessional sale price) and exemptions in capital gains tax forthe portion of land value donated are the ‘single most effective private conservationinstrument currently applied within the United States’ (Ian Potter Foundation 1999,p. 9).

Existing gifting arrangements do not allow a gifting deduction for the ‘donation’component of bargain sales (House of Representatives Standing Committee onEnvironment and Heritage 2001). This potentially creates a distortion over choicesbetween different donation types, especially for landholders unable to donate theland outright (Ian Potter Foundation 1999).

Conservation expenditures

There are key differences between the tax treatment of many expenditures on landused to generate income (including primary production) and land used for privateconservation which generates no income. These differences arise because taxdeductibility only applies to income-producing expenditures — that is, expendituresto manage land used for business are seen as business inputs and are tax deductible— while expenditures to manage land used for private conservation activities thatdo not generate income are considered private consumption. Taxpayers choose toundertake private conservation activities in competition with all other purposes towhich their funds could be put (PC 2001a).

These distortions can potentially affect the relative costs of managing land forconservation as well as alter the relative risks and cash flows of alternative activitiesand therefore investment decisions. Remaining uncertainty about future rulings on


taxation is also a concern to private landholders contemplating conservationinitiatives (PC 2001a).

Under existing income tax provisions, the tax treatment of expenditures related toconservation activities (such as weed and pest control) on land managed forconservation purposes may be different to the tax treatment of identical activitiesundertaken by other businesses conducted on rural land (including primaryproduction). This is because:

• ‘up-front’ tax deductions for income or business-related expenses and capitalexpenditure on landcare operations are only available if a commercial business iscarried out on the land — the deductions do not apply to landholders who onlywish to protect the land (and do not use the land for the purpose of gainingassessable income); and/or

• landholders who only wish to undertake private conservation activities may nothave access to the special ‘concessions’ available to primary producers. Specialtax concessions available to primary producers include a three-year deductionfor expenditure on water facilities, special tax offsets for low income primaryproducers worth 30 per cent of the amount spent on water facilities and landcare(up to a maximum of $5000 for each type of expenditure) and special provisionsto allow a taxpayer to spread or defer the tax profit in certain circumstances,such as where landholders are forced to dispose of livestock resulting from thedestruction of pasture or fodder by drought, fire or flood.

Instead of having access to these up-front tax deductions or special concessions,conservation-focused landholders can add all reasonable costs of land management,including the costs of interest payments on the purchase of land, to the cost base ofthe land and so can deduct these costs from any capital gain or loss at the time ofsale of the property. This may create a disincentive for biodiversity conservationbecause of the type and timing of the allowable deductions (PC 2001a).

Taxation arrangements thereby distinguish between similar activities undertaken fordifferent reasons. As a result, resources may be drawn into (or may be discouragedfrom moving away from) those areas receiving tax-favored treatment. This mayaffect the relative risk and cashflow of private conservation activities and deterlandholders who are not involved in businesses (including primary production) fromundertaking private conservation activities (Binning and Young 1999b).

6. Conclusions

The private sector has an important role to play in contributing to biodiversityconservation in situ. However, this contribution currently appears to be constrained


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by elements of land tenure, native wildlife legislation, the competitive neutralityframework and taxation arrangements. Some aspects of these constraints may beinhibiting the conservation of Australia’s tropical rainforests.

The pastoral lease system and competitive neutrality in Australia may need to be re-examined to ensure that conservation is not unnecessarily constrained throughinconsistent or inefficient provisions. Current reviews or developments inQueensland native wildlife legislation or taxation may facilitate some privateconservation but the nature of likely outcomes is not yet clear.

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